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Employee Stock Options (LO4, CFA2) In its 10Q dated February 4, 2012, LLL, Inc., had outstanding employee stock options representing over 272 million shares of its stock. LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions:
S 5 current stock price 5 $20.72 K 5 option strike price 5 $23.15 r 5 risk-free interest rate 5 .043. 5 stock volatility 5 .29 T 5 time to expiration 5 3.5 years What was the estimated value of these employee stock options per share of stock? ( Note: LLL pays no dividends.)
Which one of the following is an underwriting of securities where the offer price is determined by investor bids?
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 79,000 2 92,000 3 106,000 4 101,000 5 82,000 Production of the implants will require $1,580,000 in net working capital to sta..
Jenek Corporation had the following transactions pertaining to debt investments. 1. Purchased 63 9%, $1,500 Leeds Co. bonds for $94,500 cash on January 1, 2017. Interest is payable annually on January 1. 2. Accrued interest on Leeds Co. bonds on Dece..
Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. Reflect on these practices and discuss the following i..
For Stock A, the cash dividend expected one year from now is $9 [D1]. The dividends are expected to grow at a constant rate of 4% per year for ever. The required rate of return the common stock is 16%. Then calculate the current price of the stock us..
Explain whether users of financial statements should exercise caution when interpreting financial statement compliant with GAAP.
Inflation has remained low for the past three years but you have come to the conclusion that trend is ending ang inflation will increase significantly over the next 18 months. Assume you have reached this conclusion prior to other investors reaching ..
The unlevered firm expects to earn $250,000 in net operating income each year for the foreseeable future. It has a tax rate of 40% and has a capitalization rate of 8% equal to the industry required return for this type of firm. what is the overall va..
The cost of captial (interest rates) and today's economy are important considerations as well. What do you think of today's slow economy and abnormal low-interest rate market and their influence on starting a company that manufactures and markets des..
A firm is considering an investment in a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of 6million and a market value of $4.5 million. The new machine expected to have a four-year life, ..
On January 1, 20X2, the Barnum Company’s beginning inventory was $800,000. During 20X2, Cost of Goods Sold was $1,875,000. On December 31, 20X2, Barnum’s ending inventory was $700,000. What is the inventory turnover for 20X2?
Preferred stock differs from common stock in that
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